GST 2.0 Gets the Green Light: What Becomes Cheaper and Costlier from September 22
GST New Rates: The 56th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman on September 3, 2025, has paved the way for one of the biggest overhauls in India’s indirect tax system.
The revised GST structure, effective September 22, 2025, introduces major rate cuts on essential goods and services, making many daily-use items cheaper, while a few categories face higher taxation.
GST 2.0: What Becomes Cheaper
The new GST rates aim to provide relief to households, businesses, and consumers across various sectors.
1. Food and Daily Essentials
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Milk and dairy products: UHT milk will now be tax-free, while condensed milk, butter, ghee, paneer, and cheese have been reduced from 12% to 5% or nil.
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Staple foods: Malt, starches, pasta, cornflakes, biscuits, chocolates, and cocoa products now fall under the 5% GST slab, down from 12–18%.
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Dry fruits and nuts: Almonds, pistachios, hazelnuts, cashews, and dates have moved from 12% to 5%.
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Sugar and confectionery: Refined sugar, sugar syrups, toffees, candies, and confectionery products are now taxed at 5%.
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Packaged foods: Vegetable oils, edible spreads, sausages, meat preparations, fish products, and malt extract-based packaged foods now attract just 5%.
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Namkeens and snacks: Popular snacks like bhujia, mixture, chabena, and similar items are down from 18% to 5%.
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Packaged waters: Natural and mineral water without added sugar or flavours has been reduced from 18% to 5%.
2. Agriculture and Fertilisers
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Fertilisers: GST on fertilisers has been reduced from 12% and 18% to just 5%.
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Agricultural inputs: Seeds, crop nutrients, and select farming essentials are now taxed at 5%.
3. Healthcare and Education
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Medical products: Life-saving drugs, essential health products, and certain medical devices now fall under the 5% or nil tax bracket.
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Educational materials: Books, learning aids, and other educational services have moved from 5–12% GST to nil or 5%, reducing costs for students.
4. Consumer Goods
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Electronics: Entry-level appliances and mass-use electronics now attract 18% GST, down from 28%.
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Footwear and textiles: GST reduced from 12% to 5%, making them more affordable.
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Paper products: Certain paper grades are now tax-free.
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Personal care: Hair oil, shampoo, dental floss, and toothpaste now fall under the 5% slab, down from 18%.
5. Auto Sector
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Small cars now attract 18% GST, down from 28%.
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Motorcycles up to 350cc are reduced to 18%, from 28%.
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GST on electric vehicles remains unchanged at 5%.
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Car parts are now taxed uniformly at 18%.
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Luxury cars and high-end motorcycles remain at 40% GST, with no additional cess.
6. Other Sectors
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Renewable energy devices: GST cut from 12% to 5%.
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Construction materials: Key inputs used in housing and infrastructure are reduced from 12% to 5%.
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Sports goods and toys: Now taxed at 5%, down from 12%.
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Leather, wood, and handicrafts: Brought under the 5% slab, boosting affordability and demand.
GST 2.0: What Becomes Costlier
While GST 2.0 offers significant relief, a few categories continue to remain under higher taxation.
1. Sin and Luxury Goods
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Products like pan masala, gutkha, cigarettes, chewing tobacco, zarda, and bidi remain under high GST rates, along with the compensation cess, until pending cess-linked loans are repaid.
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The valuation of these products has shifted to Retail Sale Price (RSP) instead of transaction value, ensuring stricter compliance.
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A new 40% GST slab is applicable to sin goods, aerated beverages, and luxury products such as premium liquor, high-end cars, and imported luxury sedans.
2. Energy and Fuels
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Coal, which was previously taxed at 5%, will now attract 18% GST, impacting coal-based industries and power generation costs.
3. Services Sector
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Restaurants operating within “specified premises” will no longer qualify for the 18% with ITC benefit, leading to higher bills for premium dining.
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Certain lottery services and intermediary operations will face revised valuation rules, keeping their tax liability intact or higher.
Key Takeaway
The introduction of GST 2.0 marks a major shift in India’s indirect tax landscape. While a wide range of goods and services — from groceries and fertilisers to electronics, footwear, and renewable energy products — will become more affordable, high-end luxury items, sin goods, and coal-based products remain under heavier taxation.
For households, businesses, and consumers, these changes are expected to bring relief in essential spending while maintaining strict taxation on non-essential and luxury products.
